What Is A POS Transaction Fee?

Every payment processor you research will have some form of fee you have to pay for every successful transaction.

The best POS systems for small businesses offer reasonable flat-rate charges or interchange-plus fees. Small businesses will benefit from flat-rate payment processing, while high-volume businesses should consider interchange-plus processing for the best rates.

Flat-Rate Credit Card Processing

This flat-rate processing model is the most common for POS providers. As a user, you will be charged a consistent and standard fee for all transactions of the same type.

Flat-rate payment processing doesn’t mean you’ll pay the same fees for every transaction you complete. There will be different fees for online, in-person, and card-not-present transactions, but the fees will remain the same for each transaction in that category.

Average credit card processing fees are 2.6%-3.5% + $0.05-$0.50 per transaction.

Interchange-Plus Pricing

The interchange-plus pricing model is sometimes called cost-plus pricing. With this model, costs are separated into two elements: interchange fees and processor markup.

Interchange-plus pricing is the most transparent (and fair) pricing model in the POS industry. It is a particularly cost-effective option for high-volume businesses.

A proper interchange-plus pricing quote will look something like this:

Interchange + X% (percentage-based markup) + $Y (fixed markup, or authorization fee)

It’s important to remember that you will always have to pay interchange fees along with your payment processor’s markup.

Some merchant account providers will only advertise the percentage-based markup (X) and the fixed authorization fee (Y) which is misleading for users because the majority of overall costs will be the interchange fee. This can lead you to believe you’ll be paying a much lower rate than is actually true.

How Much Does A POS Charge?

Keep in mind that transaction fees are not the only cost you need to factor in when considering a POS system.

You will also need to consider factors such as the cost of the POS hardware, the monthly or annual price for the software, how many registers you need, and what paid add-ons you’ll need to operate your business.

Our article on POS system costs will break down the overall charges you can expect to see from a POS provider.

There are ways to lower or offset your payment processing fees if you’re concerned about their impact on your small business. Our general guide to credit card processing fees can help!

How To Choose A POS System

When you’re researching POS systems, consider more than just the pricing, payment processing model, and transaction fees.

It’s important to take note of the following factors as well.

• Features: Do you need a Kitchen Display System? What about social media integration? There are an almost infinite number of features you can find to help your business thrive. Make sure your chosen POS system includes the ones you need or can integrate with third-party apps.
• Free Trials: A straightforward free trial with no credit card information needed is ideal but not very common for POS providers. The best option will probably be a demo with a member of their sales team. A demo or free trial can help you decide if the POS software is right for you before you invest.
• Contract Terms: Read the fine print carefully before you sign anything. Some POS providers will offer low rates that come with high annual pricing, long contract terms, and early termination fees that can make it almost impossible to leave without destroying your bottom line.

Find out more about how to choose a POS system so you can make the right choice for your business. Good luck!